The purpose of tokenization is to meet the Payment Card Industry (PCI) Data Security standard, which mandates that credit card data can't be stored on the retailer's point of sale (POS) device or its databases after a transaction. This is one of the 12 points in the PCI DSS, which must be met by companies processing credit cards, including banks, retailers and merchants.
Many merchants have complained that in order to be PCI compliant, they will have to make expensive upgrades or replacements to their POS systems. Tokenization makes POS systems compliant without costly changes by using a 16-digit randomly generated number resembling a card number. The only numbers from the original card are its last four digits, which become the first four of the token. Using only these four numbers, the token is still PCI compliant.
Tokenization was invented by Shift4 Corp., which developed a driver for POS software to generate and accept tokens. The only thing merchants have to do is install the driver on their POS equipment. The driver is substantially cheaper than replacing or upgrading POS hardware to encrypt card numbers, which would otherwise be required for PCI compliance.
Is tokenization effective? For the time being, it probably is. Of course, eventually some clever hacker will probably find a way to beat the system. But right now it offers both PCI compliance and some level of network security -- the best of both worlds for merchants using credit cards.
For more information:
Dig Deeper on Security Token and Smart Card Technology
Related Q&A from Joel Dubin, past SearchSecurity.com expert
The security of RFID chips and smart cards may not be fully mature, but there are best practices to keep facilities safe. Identity and access ...continue reading
Picture passwords for mobile device security aren't a new idea, but they have been recently improved. Identity and access management expert Joel ...continue reading
Hacked smart cards are a large potential threat to enterprises that utilize them. Learn how to thwart smart card hackers.continue reading
Have a question for an expert?
Please add a title for your question
Get answers from a TechTarget expert on whatever's puzzling you.